ECONOMIC RELATIONS OF COMMUNIST CHINA WITH THE USSR SINCE 1950 (CIA RR 59-16)

Created: 5/1/1959

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W. 75

ECONOMIC INTELLIGENCE REPORT

ipF GOMMUNIST CHINA :WITH. THE tfSSR0

CENTRAL INTELLIGENCE AGENCY

OFFICE OF RESEARCH AND REPORTS

SECRET^

TORKWOR!)

Ti* summary and conclusions of cliis report were reviewed by theof the SubcccimitLee Or. In tenia.-ior.al Trade ond Finance of thenic intelligence Coraltt.eeiscussedeeting onThe Subcommittee, which rccornuudsed utudy Of the subject, vievB the reportontribution towardnderstandingroblem which lt considers Of priority importance and agrees tha. the conclusionse best that may be drawn from presently available data.

CON lent:;

ijununary and Conclusions

f. Foreign Trade Of Communist

y II. Financing Sino-Soviet Commodity Trade,

HT. Soviet Economic Aid to Comeunist

ft. Industrial Projects

B. Soviet Technical Assistance to Communist China

IV. Consequences Ol' Sino-Soviet Ecor.or.ic

Appendixes

Appendix A. Statistical Tables

Appendix 3. Methodology; Dollar Value of the Foreign Trade

of Conuaunist China,

Source Rele:

Tables

1. Dollar Value of therade Of Communist China,

c- istribution oi- the Foreign Trade Of Communist

China, by Dollar

3. Value oi' Imports, Exports, and Trade Balances of Communist China vith the USivR as Reported by Communishina,

6

w. l:'ASuu tlti'LizatiwKof

China, 10

Economic Assistance to InduBtrlaJ Izotlon

Id Conmnuilaty Date of Agreement,

number ol" Major Project.'; in Communist

China Receiving Soviet Assistance, Under

Construction or Completed,

7- Exports from Communist China to the USSR aa

Reported by the

by Communist China from the USSR as

Reported by the

of Imports, Exports, and Trade Balances

of Communist China vith the USSR as Reported

by the

Following Pa^re

Figureommunist China: PercentageForeign Trade, by Dollar

Figure 2. Commodity Composition of TradeChin? .and the USSR,7

Figure 3. Comaunist China: Balancerade with

tiie

Figure h. USSR: Loans to Cyranur.Ut CMna:

Utilization,ndtoance o;

ecohomicr communist china with the ussh

Summary rU'.'l CoticlJuioriG

Communist Chinar.'irk.Vtue progressn its program ol rapid industrialisation and militarisation, prinarily he-cause of the economic, military, technical, and industrial support received irom the "JSSR. Duri-ir, the First Five *earhina depended on the USSR i'or the bulk of its imports ofequipment. The projects constructed with Soviet assistancen the coal, electric power, iron, steel, copper,nd the luthe-machine manufacturing industries accounted forf newly added productive capabilities of these industries In China.

Although East Germany replaced Oonmunist China as the largest single trading partner of the USSRonrmunist China and the USSRarc the principal trading partners of each other. Tlie value of Slno-Soviet trade increased00aximum5 million5 (but this0 million estimated to be the value of military materials andck company assets turned over to China. ino-Soviet trade wasevel of0 million. Provisional informationowever, ir.ci-cates that trade increased byercent above that7evel of5 million. , Chinarade deficiti million, with the USSR. Chinamall expert surplusillionore substantial surplus7 amounting6 million,urplus8 of0 million. During the next several years, as China continues to repay soviet loans and credits, China probably will continue to have substantial export surpluses in its trade with the USSH.

the USSF Loans to Communist5 million. Loans for economic development amounted ':

the four Sino-Soviet joint stock companies accounted for anillion, and the remainder represented military loans0 million. China is estimated tc have repaidillion of the total of Soviet credits received by the end An additional sum

* Tbe estimates and conclusions in this report represent the bestof this Office as of

** Dollar values in this report are in terms of US dollars.

amounting to0 million was scheduled lo be repaidepuyraent obligations haveeavy burden on Chinese resources. The greater portion of China's debt amortization to date probubly has represented repayment of Soviet military louns.

Sino-Soviet relations have been greatly strengthenedesult of the willingness of the USSK to Supply equipment and technical services valued at3 billion for the construction of major industrial enterprises in Communist China. Ofajor installations which the USSR agreed to furnish under arrangements announced7 have been fully or partially completed. The remainder of these which are the core of China's industrialization programre scheduled to be completed during tlie Second Five Yearew agreement was announced ir.9 calling for7 ofdditional projects, for which the equipment and technical assistance is valued at3 billion- Economic credits0 million have been fully drawn On toart of the cost of the equipment und services for Soviet projects. The remainder of the cost is being paid for by China from*-ils earnings in current trade wilh the USSR.

Soviet technical assistance has beer, extended to all levels and to all brunches of the Chineseconomy, although the preciseof Soviet advisers, specialists, and technicians in China is not known. hinareater number of Soviet technicians because of its low level of industrial competence. Moreover, theof China into the Korean War necessitated temporary reliancearge number of Soviet military Specialists and advisers. Thedevelopment of technically trained Chinese has sinceharp reduction in the number of Soviet specialists and technicians.

China was the first major Asiun nation to fall under Communistand to apply Communist totalitarian neibods to the promotiondevelopment. If China canharp rise in perand show substantial economic progress, the impact of thisbe felt throughouteconomic relations will

play an Influential role in determining the future of the Communistin all Asia as well us in China.

1. Foreign Trw M'__Coi .wilst China.

Since tha assumption of Communist control over tho mainlandhina hen consistently relied on imports of capitalmilitary aoods, ferrous metals, and petroleum in order to carry out its plans for rapid IndustrialUatlon aad military modernisation. The roreign trade turnover during theveragedr the gross national product (GNP) of Communist China, und imports variedercent of the GNP.

The Soviet Bloc now accounts for about two-thirds of the total trade of Cowauiist China, and the USSR has become the principal tradingof China ln contrast to pre-Coxxunist days, when the volume of Soviet trade with China waa snail. 76 the trade of the USSH with Chinaeakhen lt amounted to of total Chi new foreign trade, whereas in some prewar years lt wasercent. 2J

0 the USSH accounted for more' thanillion) of the total trade of Communist China5 million. The peak year for Sino-Soviet tradehen the total trade of Chins was valued5 million, of which the USSR accounted5 million, orercent. Included in this trade, however, were the specialby China (transfer of the Soviet shares in four Joint-stockand the receipt of military materials at Port Arthur when Uie Russians withdrew) which were financed by Soviet credits. 6 the share of the USSR in the total trade of China dropped to 'i7 percent, orillion, thereby reflecting the absence of speclul Soviot loans. Nevertheless, excluding special loans and credits5 which probably ar-ounted0 nil11on, Sino-Soviet trade on current account6 actually increased ino-Soviet trade declined by aboutercent, amounting0 million. This decline may beprimarily to areduction ln Chinese imports ofgoods, Machinery and equipment, and ferrous metals. The rather aros'.leof imports Iron the USSR7 reflected certain adjustnents undertaken in the Chinese economy which resulted ln reduced capital investment and greater dependence on its own resources. Anwas noue with the USSR tfhlch enabled China to expand itsof Industrial goods, ores arid concentrates, and consumer goods toensateemporary reduction of the usual exports ofraw materials and foodstuffs. Tbe "leap forward" drive of the Chinese apparently Influenced Sino-Soviet tradehich,to preliminary Inrorriation, amounted to5 million, or an increase of lfi percent above that

* Por serially numbered source refere.-iees, see Appendix C.

The est Iran ted dollar value and percentage distribution of thetrade of Comnunisl China8 are indicated in Tables* hartthe geographic distribution of thetrade of Coanur.ist China by dollar valueFigure

The composition Of trace between Communist China aod lhe USSRthe complementary natures of the two economies. Thus Sovietconsist largely of machinery and equipment for China'sprogram, and China's exports to the USSR are primarilyand raw materials. Soviet exports of capital goods, however,riority contribution to China's industrialization program, whereas many of China's exports to the USSB have no direct bearing on Soviet industrial production. The Chinese have indicated, for exat-^le, that certain exports have been accepted by the USSR primarily as aof accomodation to China.

Chinese exports of sue'e co-modlticf as tin, rubber, and tungsten, on the other hand, are extremely valuable to the USSR, Inasmuch as these Stems .ire not available inut volume from Soviet re^-nrcesatlsfy internal requirements. By obtaining such commodities from China, the USSRritical need and ot the same time conserves its own foreign exchange hoiuinss. ftoreover, aboutercent of Soviet exports to Chinare believed to have consisted of military items which have not contributed to the development of the Chinese economy. Military goods Inherentlyigh obsolescence factor; nevertheless, China Is required to reciprocate with substantial exports of useful and valuable foodstuffs, minerals, and consumer goods to repay the USSR for these nilitary goods.

Chinese Imports of industrial equipment and complete Installations from the USSR haveajor contribution to the economic development of China. During the First Five Year, China imported about UO percent of its capital equipment requirements, of which more than one-half com* from the USSR. 3/ Among the other major Inpurt^ 'rem the USSa during this period, Coxsunist China received moreil-llon tons of petroleum and petroleum products; soreillion tons or steel (including castings, prefabricated steel, and otheretal-cutting lathes; xoreillion tons ofmetals;0 agricultural machines;illio

* ollows on* ollows on p. 6. Following p. U.

COMMUNIST CHINA

PERCENTAGE DISTRIBUTION OF FOREIGN TRADE BY DOLLAR

I I

| *

(Preliminary)

Table 1

Dollar Value of tbe Foreign Trade ofhina

S $

trad*

Saitera

125

y

World trad*

primarily on trade Information released by Ciamunlst China, which apparentlyu dual conversion ratio for foreign trade. The dollar value of trade'with the USSRHoa countries is derived hy applying the conversion ratiouanuble,ross rateonversion ratiouan to The dollar value ofthe Free World ls derived from the conversion ratioto

ray not agree with tht sum of their rounded components. Figures arcllllon.

Table 2

Percentme Distribution of the Foreign Trade of CcoKunist China by Dollar Value

Percent

2

i_

ry)

Bloc

Satellites Far Eastern

Satellites

O.V

1.1

..

3-8

.8

3-e

V-l

b/

-

Woild trade

trade

Biicnuto of the* una! conversion rata system used by China, these figures differ from those announced by tlie Chinese on distribution of the yuan value of trade, u. Subtotals nayec tfltll tlie sum of their rounded components.

worth of scientific apparatus; andmounts of other equipment needed for the industrialization program off

'flic major Chinese export* tc the USSR continue to be agricultural products, but there hasignificant shirt ln the relativeof agricultural raw materials and foodstuffs. Shipments af agriculturalrincipally tobacco, soybeans, peanuts, tun& oil, and oilseelsdue lined fromercent of totalto the USSRC to about I& percent Of total exports to the USSRV, evefj though the value of this category ol exports almost doubled0 Foodstuffs (principally wheal, rice, tea, spices, meat and dairy products, fish, vegetables, fruits, uitd edible vegetablee other hand, Increased fromf total exports to the USSR0 toercentfivefold value increase.

Bn other principal Chinos* exports to the USSR are nonferrous metals and alloys, textiles,extile raw materials. Certain Chinese exports to the USSR areroving importance In recent years. Fornatural rubber (whicheexport) and building materialsfor moreillion of Chinese exports

In the future the pattern for Communist China's trade with the USSR probably will be guided by the desire for increased reliance on Internal resources. This attitude may bc reflectedradual decrease in the percentage of complete installationsortion of total imports of equipment and machinery from the USSR after the completion of the Second Five Year. It is also expected, however, that Sino-Soviet trade will continue to grow lo acsolute terms daring this period and that the USSR will continue to te the principal trading partner ofChina. The Chinese hove indicated the intention of increasing the import of materials required for industrial and agriculturalsuch as petroleum and petroleum products. There maylight incMiM In the import of other items such ae chemicals! pharmaceuticals, and certain types of consuaier {roods.

frade between Co-^cir.ist China and tne USSR which, ir. the past, hasrelative zc the growth of China's GUP should continue to ln-creiis'*. China's exports likewise shouldiidlar patternowate ofercent annually. In order for China to pay for Its current Imports and, in addition, to repay the USSR military and teono::iic developmental credits previously extended, the Chinese will be required to maintainxport surpluses with the USSR, particularly

* Tro Imports and exports exchanged between Communist China and there shovn in Appendix A,ndp.below. Significant changes in the composition of this trade-are illustrated in Figure 2, following p. 8.

Although agricultural products will continue to be the major Chinese exports to the USSR, it is probable that exports ofmetals, and light industrial products (particularly textiles) will be increased.

II. Financing Sino-Soviet Commodity.

he value of total trade between China and the USSR amounted9 billion. China exported goods valued atillion to the USSR and in turn receivedor. the USSR valuedBThis balance-of-trade position resultedumulative trade deficit for China1 millioneeeinformationc1 indicates that China nay have an9 million in trade with the USSR-

Except" the imports of Communist China from the USSR have exceeded its exports to the USSR. Part of thetrixdc deficit accumulatedas financed by Industrial credits, and part apparently was financed by military credits.

Table 3

Value of Imports, Exports, and Trade Balances of Communist China with tho USSR as Reported by Communist China

Million US S

Year

Trade

}9

Prelininary)

s J

a. Derived Trom trade Information released by Communist China. For comparison with Sino-Soviet trade figures reported by the USSR, see Appendix. B, Tableelow.

COMMODITY COMPOSITION OF TRADE BETWEEN COMMUNIST CHINA AND THE7

CHINESE EXPORTS

CHINESE IMPORTS

.

fcMM'if.

, when Conmunist China Incurred an import surplus each year in its trade with the USSR, the amounts uere uniform with3 In these years the large import surplus probably represented large amounts of military goods delivered to China by the USSR. These deliveries may have resulted from orders placed by China for Soviet military equipment during the Korean War. hen Soviet forces withdrew from Port Arthur, Manchuria, the USSR turned over military goods to Chinaoan estimated5 million. In addition to the military material included5 imports from the USSRillion representing Soviet shares in the four Sino-Soviet Joint stock companies retraeeded to Chine

ommunist China reversed its balance-of-trade position with the USSR, resultingrade surplus ofillion, and on even larger surplus amounting6 million was achieved information6 indicates that Communist China hasa surplus of0 million in Its trade with the USSR. An export surplus in Chinese trade with the USSR should continue,repayment of Soviet loans and credits.

Information regarding nontrade items is not sufficientlyto permit an estimate to be made of the over-all balance ofbetween the USSR and Communist China. It is apparent, however, that the deficit in commodity trade was the most important element in the Sino-Soviet balance of payments and that the annual trade deficits undoubtedly were compensated by drawing on Soviet military andcredits. he USSR lias extended military andcredits amounting to5 million. Thus drawings on Soviet credits were more than adequate to compensate for thetrade deficit1 million. The Soviet loans to Communist China, including utilization and repayment by China, are summarized in The balance of trade of Communist China with the USSRs shown in* Tlie utilization andby Communist China of Soviet loans and the relationship to balance of trade are shown in*

III. Soviet Economic Aid to Cos-aunt st China.

A. Industrial Projects.

The keystone of Sino-Soviet economic relations during the First Five Year Plan has beenajor projects being built with Soviet aid and technical assistance. These projects have strengthened Sino-Soviet relations and have become the core of the industrialization

** Following

TLi;.ie

Estimated Utilization and Repayments of Soviet Loans to Communist

Million US $

Utilization

&/

Other

China

d/

Soviet loans to Chinamounted tomll-lion yuan and were converted at an exchange ratio ofyuan to

illion estimated to be the value ofjoint-stock companies returned to China by the USS3-

planned for repayment

may not agree with the .sum of their rounded components.

program of Communist China. The need for machinery and equipment for these projects insures that the USSR will continue to be the leading trade partner of China during the Second Five Year. The USSR has announced that the total cost of industrial equipment and technical services to be furnished China for5 million, financed in part by Soviet loans Consequently, it appears that only aboutercent of the total foreign exchange costs of these projects is covered by Soviet credits.

Soviet participation in the industrialization program ofChina began0 after the signing of the Slno-Soviet Treaty of Friendship, Alliance,tuil Assistance. Under this pact the USSR agreed to supply China with equipment and other materials for the

-

9

USSR: LOANS TO COMMUNIST CHINA UTILIZATION, REPAYMENTS, AND RELATIONSHIP TO THE BALANCE OF TRADE

5,0

Imsert Surplus

[icon Suffllut

MiliU'yD^ibon

- ^mo

restoration and building ofndustrial enterprises. 6/ eparate agreement providedoviet loan0 million to China. 3 the USSH agreed to assist in the expansion and construction of annumber of electric power stations, jj Ic. the saoe year anwas signed providing for economic and technical assistance in the construction and renovation ofdditional enterprises. 8/

Announcement was made inf protocols by which the USSR granted an additional credit0 million for economicand assistance for the construction ofore industrialin Corraunist China. The protocols also provided for the sale of additional equipment for the enterprises valued0 million. 9/ The agreement signed6 provided fordditional industrialto be constructed with Soviet assistance during the final years Of the First Five Year Flan and the early years of the Second Five Year Plan. Equipment for these new projects was valued5

ommunist^Chinae USSR signed anproviding for Soviet technical aid to China for the buildinga v. of " jo:1

to the Chinese Communists, theserojects are included ir. the first group of industrial enterprises which tte USSB will help China to build during the Second Five Year Plan. It is possible thatlantsto in the agreement of6 are part ofajor projects already covered by the existing Sino-Soviet agreements. hange in the scheduled construction of5 in China may bein part to the "leap forward" acceleration of the industrialization program.

In9 an agreement uas announced which calls fordditional projects valued atillion to be constructed during theears. No new loans arc involved In this agreement. Although it ls possible that some of these projects were included In previousit is apparent that installations not covered in previous .arrangements are involved in this most recent agrecmeiiv.

Because of tne ambiguity cf the announcersnts regarding Sino-Soviet economic agreements. It is not possibleetermine precisely the number of Soviet-assisted projects pronise: to China. Any estimate of the number of projects may bereover, for projects vary considerably In slas, value, and scope. ingle project may consistmall reprocessing plant, or it may consist;arge steel plant as wellumber of associated 3teel processing installations.

A more laeanir^fui measure of the scops of Soviet assistance for the industrialization of Cosnunist China Is the value of complete plants, equipment, and technical assistance that have been promised or have been

-

delivered. Before Che most recent agreement In the USSR had agreed to provide completets and technical assistance valued at aboutillion for constructing projects in China. The agreement of9 called for additional equipment and technical assistance amounting to3 billion. Thus0 the USSR hasitself to3 billion in industrial assistance in the form of complete installations, of which it is estimated that at leastillion have already been fulfilled. The remainingof soiteuhat more thanillion are to be implemented duringarge portion of which is to be allocated during the Second Five Year Plan ending Additional equipment, notin the assistance agreements, has been and will continue to be delivered to China within the terms of annually negotiated trade pacts. It is clear, therefore, that the Soviet role in the industrialization plans of China will be substantial under existing agreements for many years. Moreover, additional agreements may be negotiated before China's

Year Plan hat been sample ted, in particular il' the program results in large increases tn the export,.

, : .

current exports of Coaniunist China, and industrial loans extended by tht USS3 for use ir financing these projects total onlyillion.0 loan0 million was drawn on by Chinaeriodears beginning in Repayment of this loan begannd is being made lnnnual installmentsillion, plusat tbe rateercent per lhe Soviet loan0 million was fully utilized by the end7 and alleviated the burden of servicing the loan0 and other loans during theears of

A summary of Soviet economic assistance to industrialization in Communist Chinas shown in Table

Soviet assistance for these projects is comprehensive, including selection of factory sites, collection of data for planning purposes, supply of the equipment, supervision of construction at the site,ll atachinery,iciancehe staye of trial ij/ Major emphasis of the Soviet aid program in Communist China has been on the reconstruction, expansion, and construction of iron andlants, hcavjactories, and electric power (see

*ollows on* ollows on p. ih.

Table 5

Soviet Economic Assistance to Industrialization in Communist China

by Date of Agree Tie

Number

DateCredits of Complete Sets

US $) Equipment a/

Mil:ion US & Million Rubles

c/

c/

1

a!

-':

technical aEsi3tar.cc related to these projects.

signed to deliver equipmentotal of lUl projects.

sum Includes the value of equipment and technicalall of the I'll projects.

has been assumed that the9 agreement is anthe8 announcement and therefore includes the V7 projects

tia! agree

at the official rateubles to

The Chinese Communists originally planned to start construction ofprojects under the First Five Year, but no moreere begun by the end The Chinese haveotal ofrojects in full or partial operation at the endf whichan be verified (see. Thus aboutercent ofa-ior projects are scheduled to be completed during the Second Five Year. The Chinese Communists report that in the firstontl

ollows on p. lh.

8 the USSR delivered complete sots of equipment forigmachine building, power, and coal enterprises. By the end8 the Chinese expected aboutajor Soviet-assisted enterprises to begin full

Table 6

Estimated Number of Major Projects In Communist Chins Receiving Soviet Assistance, Under Construction or Completed

Iron and steel

Machine

Electric power

Coal

Aircraft

Chemical

[Jon ferrous

Paper

Petroleum

Textile

Shipbuilding

Communication s

2

6

Under Construction Verified Probable

l '

s

Number of

10

The form adopted by the USSR for aid ir. the constructionill differ from that of the First Five Year Plan. According to Peiping, the Chinese will survey and design most of the projects and the USSR will supply the principal, equipment. Asowever, technicians from the USSR will continue to assist China in all phases of

One of the most important of the key projects being constructed with Soviet assistance is the An-shon Iron and Steel Complex Sn Northeast

- Ik -

China.* The Chinese slate that two-thirds of the Capli-al :hi:

: ,i -

lion tons of pigillion tons of steel, andillion tons of steel products According to the Chinese, these goals were alaost achieved by the end

The USSR has designed and is assisting in the construction of two other iron and steel complexes, one at Wu-han (Hupehand tlie other at Pao-t'ou {inner Mongolia). The Wu-han complex is reported by the Chinese Communists as more than *i0 percent completed. t Wu-han, completed in8onths ahead of schedule, is claimed by the Chinese to be "one of the biggest in the world,aily capacityC0 tons of pig iron,the dailyonsj of the largest blast furnace ln GreatG/ Both of these major projects are plannedj,/

Nearlyercent of the production of iron and steel inChina7 was produced in plants built with the assistance of lhe Moreover, Soviet assistance for this industry shouldresolutionumber of problems, such as undue concentration of production at An-shan, inadequate development of ore-miningand the inability tc supplyncreasing variety or steelsby the advancing technological level of Chinese industry. These

plar.tr. at Pao-t'ou and Wu-iian and tlirough the establishment of small and medium-size planta located throughout the country near ore deposits and local centers of consumption.

Communist China hasolume of Sovietthe exploration and development of petroleum resources. Thisio: >

in Chinaons2 toillion tonshe completion of the new refinery at Lar.-chou, in particular, willa significant addition to refinery capacity and also will provide China with its first aodem refinery capable of producing fuels forengines. Ai though- China has increased its capability to provide certain accessory material and equipment froc domestic production, it must continue to import most essential types of petroleum equipment*

The USSR designed and constructed the chemical industrial center atn Northeast China. The center,hemical fertilizeralcium carbide factory,yestuffs factory, was opened

" Actually, components of the An-shan Iron and Steel Complex, such as Individual blast furnaces, arc reported by the Chinese Cwanunlats as separate projects receiving Soviet assistance.

ing*/ China plans to increase investment in the chemical -Industry during the Second Five Year Plan and to support in particular its agricultural program by expanding its production capabilities for fertilisers. Soviet assistance is expected to be utilized iii expanding the capacity of the installations at Kirin and in other localities as well.

ihc USSR also isubstantial contribution to the power industry in Coimunist China. Powerplants built with Soviet aid were reported to account for aboutilowatts (kw) out of the power-plant capacity7 of approximately million kv. 2jJ In addition, it is estimated that the USSR has delivered power-generating equipment ofw capacity which is utilised in other plants throughout China. $ the USSR was expected to deliver to China equipment,ower-generating capacity ofarge portion of which was to be placed in operation by the end of the year. 2jt/ It isthat China had an electric power output7 ofillion(kwh)igher than thatillion kvh) but low compared with those of Japan (f8 billion kwh) and the0 billion kwh).

esult of Soviet assistance and equipment, Communist China now-watt. thermal research reactorlicnr-yelot-on. These facilities Fire the largest in Lhe Bloc outside the USSR.

Duri:ig the First Five Year Plan, Communist China depended onfor the bulk of its imports of industrial equipment. AccordingChinese Communist official of the State Planning Commission, theconstructed with Soviet assistancen the coal,power, iron, steel, copper, aluminum, and lathe-machinei percent evLy :

capabilities of their respective industries. During the Second Five Year Plan, China intends to produceoercent of its ownfor industrialnd thereby to reduce its dependence or. such imports. There are indications that this goal is already being achieved. or example, the Fu-la-erh-chi Heavy MachinePlant revised its annual investment plan and canceled orders for equipoent from the Soviet Bloc valued atillion in favor of dooee-

B. Soviettor.ist China.

Soviet technical assistance has become an integral port of all phases of the industrial development of Ccmeauiisl China with Sovietemployed at all levels o: and Ir. all branches of the Chii.ese economy. An acute shortage of trained Chinese personnel has fostered

-

dependence on large numbers of Soviet technic!aim during the pastyearn. The Slno-Soviet Joint-stock companies formed0or exanpio, were organised and operated prirariiy by Sovietrlal and technical personnel, 'ihe irdustrlui projects for which Soviet assistance is being provided have required tne services of many Soviet expt-rta. In addition to providing industrial technicians, the USSR also has sent econordc advisers to assist ln tne formulation and administration of the development program of Ccesucist China.

The precise number of soviet odvisere, specialists, andin Communist China Js not known. hinareator number of Soviet technicians because of its low level ofcompetence and because of its entrance into the Korean War. The subsequent development of technically trained Chinese hasharp reduction in the number of Soviet specialists and technicians in China. The Korean truce und the withdrawal of Soviet forces from Port Arthur also permitted the withdrawal of large numbers of Soviet military specialiats.

A substantial demand for Soviet technicians probably willduring the Second five Year Plan primarily because these experts will be required on Soviet projects that are still under construction or in the planning stage. For example, Soviet petroleum specialists are still engaged In prospecting in various parts of China, and the USSR will continue to provide technical assistance ln the field ofenergy. In addition, Soviet technicians and advisers willto serve ln other sectors of the Chinese Communist economy.

The USSR, besides providing technical assistance and on-the-.job training in China, has trained abouthinese workers,and factory administrators in the USSR during the First Five Year Most of these pert were trained Tor operational work In the factories and other installations being constructed with Soviet assistance. The An-shan Iron and Steel Coapiex alone cent moreeople to the USSR for practical training.

Although less tangible than technical assistance in theexpert advice and training, Soviet transfers of scientific andInformation have beer of considerable importance inindustrialization program of Communist China. Under theand Technical Cooperation Agreement ofUSSR

has provided China with blueprints for the constructionindu of factories and enterprises, designsets of machinery andand substantial information on production agreements were signed in6ne for Joint development of the power resources, navigation, and irrigation or the Hellungxiang (Amur) Riverand another for technical cooperation in civil

-

Knowledgeata-obtained in tilts aannsr from the USSH have beento China even on projects with which tlte USSR has not been involved.

IV. Consequences of Slno-Soviet Economic Hclatloiui.

Communist China appreciates the technical, econoaic, military, and Industrial assistance which the USSR has provided, but the Chinese arcnot abject in their gratitude. They arc aware of the cle.-aente ol mutual -advantage in their relations with the USSR, the Ideological andsupport which China provides, within and outside of the Soviet Bloc, and the assistance introng industrial base that China receives in return. They believe that there are gains to both nations in trade between themselves ond the USSH. Thus the Chinese do nottheir pojltlon as thatependent satellite, in terms either of ideology or economics, but believe rather that they possess sufficient independence to influence the course of intra-Bloc relations. Toand to Ltrengthen the pouitlon of China within the Bloc, it ia likely that China will strive for even greater lndeperidence byin its developmental program its own savings and internal resources whenever possible. At the same time, however, China probably willintra-Bloc unity hy suchs long-term trade agreements and participation in Bloc-wide plans for economic cooperation.

Just as Chinese leaders recognise their position of strength within the Bloc, so also do they perceive their position of influence on the Free World. The experience of China, the only major underdeveloped country in the Communist Bloc, in applying totalitarian methods to the promotion of economic development under conditions similar to thosein many other countries,being closely observed In all parts of the world. If China cur.harp rise in pirr capitaand show substantial economic progress, the Impact of this success will be felt throughout the world. Leaders in underdeveloped countries, in particular, ambitious for material progress and impatient to find short cuts to industrial devclop-nent, may be sorely tempted to ignore the consequences of totolltarlun control and attempt to follow ir. the footsteps of the Chinese Corear.lsta. Moreover, the significance of the role of the USSR in fostering rapid industrialization in China already has attracted the attention of leaders of many underdeveloped countries. Because the success of China's industrialisation program will haveconseq.ier.ees on the future growth ofommunist Ideology ns well as on the foreign policy interests of both China aod the USSR, both of these rations undoubtedly will see* to maintain and to better tltc economic relations that have been developed during theears.

- ia -

>

ID H, (D

1

IS

ulvO toV;

> o

I

-v. ro

T& le

Imports by Communist China from the USSR as Reported by the USSR

.:

..

$

s

;

i'.lM^i-

installations

32)

rjctala

- ir.etala

d/

petroleum products

e/

d/

;';

.

30

forollow on

Table 8

Imports by Cociwmist China fro* tba USSR ao Reported by the USSR a/

Continued)

$

$

$

I

and

installations

awtoli

metal..

petroleum products

&/

e/

for f/

{

data contained in thla table ore fror., except otherwise indicated.

V. %

c. Including such categorieshemicals, building materials, pnarsaeeuticals, and cultural and consumer goods.

fi Represont-ng thef goods not listed by Soviet sources and believed tc be primarily of military and strategic origin.

-

APFLKDIX U

METHUDOIOCY: DOI JARF 1KB FCHEIGH TRADE

The estimated doilur value o" the foreign trade- cr" Conwunist China for theseee sig-nificar.tly different fron that derived by the previous net hod whereby the yuan values of trade (as reported by China) were converted into dollars on the basis o' tin dollar crossrate to the yuan-sterling exchange rate officially reported by China.

ew Soviet figures for trade with ComeiuolBt China (see) as well as bom additional statistics on trade with the Euro> penn Satellites have been released. The new information suggests that China isual exchange rate system which resultsower value of the yuar. in trade with the Bloc than in trade wltn the West. This procedure nay possibly be attricutaa to such factors ae thebetween internal and external prices and the comnxidity mix of trads with particular areas.

For the1& the rew Soviet figures, whenwith appropriate data from Chinese sources, reveal antely constant ratio ofuan, us valued in Sino-Soviet trade, to the dollar equivalent of the ruble values. Thus the yuan appears to be valued at par uith the ruble inovict trade.

Variations frcci equality between the ruble and Che yunr. (there are substantial variances only for Mft0ppear todlffcrcr.ces in Chinese Qowualat and SoviM reporting techniques. It appears, for example, that0 the USSR included militarywhich China excluded and tnat3 the Chinese included but the USSR excluded the transfer of Joint-stock company assets and military equipment and bases within China from Soviet to Chinese ownership.

P.bove.

ollows on

h i; v

'able

Value of Imports, Exports, ond Trade Balances of Communist China with the USSR as Rcportca by tho USSR

Million US $

Trade i/

fj!'LS

Balance

9^1

r

22'j

c/

y

data contained inable are frouc/otherwise indicated.

trade figures arc derived from unrounded data.

c. W

SOURCE REFERENCES

Evaluations, following the classification entry and designatedave the following significance:

Source of

ocumentary

Confirmed by other source

-

reliable

Probably true

-

reliable

Possibly true

-

reliable

Doubtful

-

usually reliable

Probably false

-

reliable

Cannot be judged

be Judged

"Documentary" refers to original documents of foreignand organizations; copies or translations of such documentstaff officer; or information extracted fron such documentstaff officer, all of which may curry the field evaluation

Evaluations not otherwise designated are those appearing or. the

port. ?Io "RR" evaluation is given when the author agrees with the evaluation on the cited document.

1. EIC. SG,Ir.ports and Exports,iuvi Tn-ir-.spor-

2- CIA^ 0 OFF USE. Eval, RR 2.

3. CIA. FBIS, Daily Report (Far.OFF USE. Eval. RR 2.

li. Peking Review, voleking, U.

5. CIA. FBIS, Dally Report (Ferpr.

OFF USE. Eval. RR Sino-Soviet Treaty and Agreements, U. Eval. RR 7. State, Moscow. , C. Eval. RR. CIA. FBIS, Daily Report (Far5.

OFF USE. Eval. RR 2.

-

2. AAA 2. OFF USE. Eval. RRO. . OFF USE. Eval. RR 2.

FRIS, Daily Report (Far.

OFF USE. R 2.

People'a China, U. Eval. RR 2.

CIA. FBIS, Dally Heport (For-

OFF USE. Eval. RR Ibid.

TckinRbove).

CIA. KB IS, Dally Report (Far.

OFF USE. Eval. RR 2.

of World Broadcasts,farSupplement,- OPT USE. Eval.

,. 1. OFF USE. Eval. RR 2.

CIA. CIA/RRonstniction Projects in Communist China

Perfonacd with Soviet S.

SuccHrv of World Broadcasts,ruiir Rupplwnt no ?m,. OFF USE. Eval. BR 2.

of WorldFarSupplement, IK OFF USE. Eval. RR 2.

Hong Kong. Current Background,,.

U. Eval. RR 2.

CIA. FBIS, Dally Report (Far1, P- BBB 9- B 2.

??. CIA. FBIS, Daily Report (Fur OFF USE. Eval. RR 2.

Summary of World Broadcasts,Farconomic Supplement,. OFF USE. Eval. RR 2.

23. CIA. PBJS, Daily Report (Far.

OFF USE. Sval. RRof WorUtFar East),

tconomlc Supplement no 3M,. J. OFF USE.

it 2.

U>i. Econonlc Bulletin for Asia and the Fur East, vol. 9,

Eval. RRSSR. slfrakh. statisticheskiy sborntk (The USSR in

cmi II.

Eval. Iioc.

2fi. CIA. ally Report (Far-fft UBS. Eval. PRtatr. Hong Kong. Survey of China Mainland

p. ore use. KST kh 2.

27. Cl-i. S. Dally Report (Far4 OFF USE Eval. KB B.

2b. ang Kong. Purvey of China Mainland I'reas,.

, p. - Eval. RR 2.

-

29- People's China, Peking, U. Eval. RR 2.

30. Statu, Jlong Kong. Survey oi' China Mainland Presa,

- U. fcvul. HUl. USSR. Vncshroaya toritovlya SSSR: statistlcheskly obzar 10

(Foreign Trade of tfw USSR: U. Eval. RR 2.

svi torgovlya SSSR: statistlcheskly ohzor xa

(Foreign Trade of the USSR: u. IVal. rr 2.

32. Sladkovskly, K. "Uspekhi Sovetolio-Kltaysitoy torgovll"

(Successes of Soviet-Chineseneshnvaya lorp.ovlya.

U. Eval. RR SladltovHkiy, M. Ocherkl fkorioir.lchtskoy otnoshenlya SSSR g

Kltaem (Survey of Economic Relations of the USSR with China),

U. Eval. RR Vaestuiyaya torp.ovlya SSSR,, Sladk , op.. ubov^TT

SiadKovsklv.it.above).

lb Id.

SludkcvsXly., above).

State, Mobcow..FF USE. Eval. HP.. orgovlya. no. U. Eval.

li . wTimes, . 3. U. Sval. RR 2.

Original document.

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